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Posts Tagged ‘mortgage problems’

Freddie Mac, Fannie Mae Deja Vu?: Part II

Posted by Larry Doyle on April 8th, 2010 11:51 AM |

On Christmas Eve 2009, the Obama administration provided a blank check to the wards of the state known as Freddie Mac and Fannie Mae. (“Fannie and Freddie’s Huge Christmas Bonus”)

What other quasi-government institutions have a very similar business profile as Freddie and Fannie? The Federal Home Loan Bank system, acronym FHLBs, commonly referred to within the financial industry as FLUBs. I will reserve comment on that moniker. Ten months ago, I questioned whether the dynamics at work within the FHLB system would be the equivalent of what has transpired at Freddie and Fannie. I wrote “Freddie Mac, Fannie Mae Deja Vu?” and highlighted:

Can our economy absorb another financial hit of the magnitude of Freddie Mac and Fannie Mae? (more…)

More Bank Fraud

Posted by Larry Doyle on January 16th, 2010 12:53 PM |

The bailing out of our largest financial institutions was a violation of moral hazard of the greatest magnitude. With that violation well in place, America is now facing violations of other moral hazards. What do I mean?

The mortgage modification program is a joke because the banks holding the mortgages have no incentive in modifying them. Why? Because, to a very large extent, if the bank modifies the primary mortgage then it has to write off the value of a second lien, if in fact a second lien exists. Given the amount of equity borrowers took out of their homes, there are a lot of second liens outstanding.

How are the banks handling these second liens? Violating a moral hazard and committing fraud in the process. A report from CNBC, Big Banks Accused of Short Sale Fraud, highlights this reality.  The report outlines: (more…)






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